DOES A FEDERAL GOVERNMENT SHUTDOWN, EVEN A SHORT ONE, POSE LASTING ECONOMIC HARM TO SAN DIEGO’S RECOVERY?

Last week’s question: San Diego County’s job growth has steadily slowed. Do you expect this slowdown to continue for the rest of the year?

Online poll results

YES: 95%

NO: 5%

NO: The federal government shutdown placed about 800,000 federal nonessential workers on furlough; about 150,000 are in California and some 33,000 in San Diego, representing about 2.5 percent of the region’s jobs. Most, if not all, of these workers will continue to spend, using savings, borrowing and credit to pay for essential items, likely cutting back in discretionary areas which represent about 22 percent of a household budget. So, although most San Diegans won’t feel the budget squeeze, the shutdown will be inconvenient as processing grinds to a halt. Those furloughed will experience both, plus put up with irate citizens when government reopens.

NO: Whatever the effects, San Diego is impacted three times more than elsewhere as the local economy is that much more dependent upon federal government spending. This is primarily due to the vast array of military operations here, but also the extensive border and coastal operations and high-value research funding administered to local institutions. More slowdown than shutdown, essential work continues, and nearly everything will eventually be made up, including back pay for workers (sort of an eventually paid vacation). The most evident temporary impacts will be felt by businesses more dependent upon federal employee spending.

NO: The shutdown won’t cause lasting harm to the recovery, but it will slow it. San Diego will be impacted more than most metropolitan areas because we get more money from the federal government than other places. The most prominent expenditures are for the military. Uniformed personnel won’t be affected, but civilian support staff and contractors will be. Other areas where San Diego differs from other regions include research in the sciences and border security and issues. Cuts in the flow of federal money will eventually spread throughout the economy, as reduced income will impact things such as restaurants, retail, and personal services.

NO: We’ve been through this process many times before, and none of those resulted in a significant lasting effect on the economy. In part that’s because each of the previous shutdowns was followed by the furloughed government workers going back to their jobs and receiving back pay. I worry more about what would happen if there’s not an agreement on the upcoming debt ceiling negotiations. That’s a much bigger unknown that I think did affect financial markets, consumer sentiment and business spending when we last seriously threatened to bump up against the debt ceiling in the summer of 2011.

YES: Although it depends on what you mean by “lasting.” The closure of the Miramar Air Show exemplifies the economic domino effect of a government shutdown, as orders for goods and services to vendors are canceled, demonstrating how the shutdown ripples through the region. Importantly, the entitlement programs are not shut down, or the impact would be very nasty. I can see one “lasting” effect may be a referendum on the mission of government: the shutdown period is certainly a laboratory to test smaller or efficient governing. Yet, the more impactful “lasting effect” will be at the polls, when voters remember this moment as they consider who to represent them in Washington.